Western Energy Services Corp. ("Western" or the "Company") (TSX:WRG) announces the release of its first quarter 2017 financial and operating results. Additional information relating to the Company, including the Company's financial statements and management's discussion and analysis as at and for the three months ended March 31, 2017 and 2016 will be available on SEDAR at www.sedar.com. Non-International Financial Reporting Standards ("Non-IFRS") measures and abbreviations for standard industry terms are included in this press release. All amounts are denominated in Canadian dollars (CDN$) unless otherwise identified.
First Quarter 2017 Operating Results:
Western is an oilfield service company focused on three core business lines: contract drilling, well servicing and oilfield rental equipment services. Western provides contract drilling services through its division, Horizon Drilling ("Horizon") in Canada, and its wholly owned subsidiary, Stoneham Drilling Corporation ("Stoneham") in the United States ("US"). Western provides well servicing and oilfield rental equipment services in Canada through its wholly owned subsidiary Western Production Services Corp. ("Western Production Services"). Western Production Services' division, Eagle Well Servicing ("Eagle") provides well servicing operations, while its division, Aero Rental Services ("Aero") provides oilfield rental equipment services. Financial and operating results for Horizon and Stoneham are included in Western's contract drilling segment, while Eagle and Aero's financial and operating results are included in Western's production services segment.
Western has a drilling rig fleet of 56 rigs specifically suited for drilling horizontal wells of increased complexity. Western is currently the fifth largest drilling contractor in Canada, based on CAODC registered rigs, with a fleet of 51 rigs operating through Horizon. Of the Canadian fleet, 24 are classified as Cardium class rigs, 19 as Montney class rigs and eight as Duvernay class rigs. As compared to the Cardium classified rigs, the Montney class rigs have a larger hookload, while the Duvernay class rigs have the largest hookload allowing the rig to support more drill pipe downhole. Additionally, Western has five Duvernay class triple drilling rigs deployed in the United States operating through Stoneham. Western is also the third largest well servicing company in Canada, based on CAODC registered rigs, with a fleet of 66 rigs operating through Eagle. Western's oilfield rental equipment division, which operates through Aero, provides oilfield rental equipment for hydraulic fracturing services, well completions and production work, coil tubing and drilling services.
Currently, eight of Western's drilling rigs are operating and three of Western's 56 drilling rigs (or 5%) are under long term take or pay contracts, with one of these contracts expected to expire in 2017 and two expected to expire in 2018. These contracts each typically generate between 250 and 350 Billable Days per year.
Western's capital budget for 2017 of $13 million remains unchanged, and is comprised of $2 million of expansion capital and $11 million of maintenance capital. Western believes the 2017 capital budget provides a prudent use of cash resources and will allow it to maintain its premier drilling and well servicing rig fleets, while remaining responsive to customer requirements. Western will continue to manage its operations in a disciplined manner and make any required adjustments to its capital program as customer demand changes.
Since hitting 10 year lows in the first quarter of 2016, commodity prices, while remaining well below previous highs, have improved significantly. As such, North American drilling rig counts have begun to recover and the Company is expecting increased year over year activity levels throughout 2017. However, improved pricing for the Company's services is expected to lag the recovery in activity and will occur gradually as rates are typically increased for rigs and drilling programs on an individual basis rather than universally. Improving gross margin is a priority for the Company and Western is working to implement higher rates with each rig that is awarded work, as the worst of the downturn in crude oil and natural gas prices appears to have past. Low prices for Western's services will continue to impact Adjusted EBITDA and cash flow from operating activities in the near term.
However, Western's variable cost structure and a prudent capital budget will aid in preserving balance sheet strength. In addition to $60.4 million in working capital, including $34.1 million in cash and cash equivalents, at March 31, 2017, Western has $60.0 million undrawn on its syndicated revolving credit facility and its committed operating line (the "Credit Facilities"), which do not mature until December 17, 2018 and no principal repayments are due on the $265.0 million 7 7/8% senior unsecured notes (the "Senior Notes") until they mature on January 30, 2019.
Oilfield service activity in Canada will be impacted by the development of resource plays in Alberta and northeast British Columbia including those related to increased crude oil transportation capacity through pipeline development, increased environmental regulations including the implementation of a carbon tax in Alberta, and foreign investment into Canada. Currently, the largest challenges facing the oilfield service industry are continued customer spending constraints as a result of lower commodity prices and the increasing challenge of staffing field crews, particularly in the well servicing division. Western's view is that its modern drilling and well servicing rig fleets, reputation, and disciplined cash management provide a competitive advantage which will enable the Company to manage through the current slowdown in oilfield service activity.
2017 First Quarter Financial and Operating Results Conference Call and Webcast
Western has scheduled a conference call and webcast to begin at 10:00 a.m. MDT (12:00 p.m. EDT) on Thursday, April 27, 2017.
The conference call dial-in number is 1-800-273-9672.
A live webcast of the conference call will be accessible on Western's website at www.wesc.ca by selecting "Investors", then "Webcasts". Shortly after the live webcast, an archived version will be available for approximately 14 days.
An archived recording of the conference call will also be available approximately one hour after the completion of the call until May 11, 2017 by dialing 1-800-408-3053 or 905-694-9451, passcode 5650750.
SOURCE: Western Energy Services Corp.
The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.